Exchange Traded Funds (ETFs) are a type of investment fund that trade on stock exchanges, similar to stocks. Unlike traditional mutual funds, which are only traded once a day at the day's closing price, ETFs can be traded throughout the day. Most ETFs aim to replicate the performance of market indexes, such as the S&P 500, by holding the same securities in the same proportions as the index. ETFs have several advantages over mutual funds, including lower costs, the ability to track the overall market rather than individual stocks, and potentially better investment results, as active fund managers often struggle to beat the market. These advantages have led to a remarkable 3,000% growth in the number of ETFs worldwide since 2003.
The largest ETF provider varies by region, but in the United States, BlackRock, under the iShares brand, holds the top spot with a 33% market share as of July 2023. BlackRock manages nearly half of the 15 largest individual ETFs in the U.S. by assets under management. Other major ETF providers include State Street and Vanguard. The largest individual ETF is the SPDR S&P 500 ETF, managed by State Street, with assets totaling around $427 billion as of July 2023.
The ETF industry has experienced remarkable growth. Global ETF assets under management (AUM) have surged from $204 billion in 2003 to $9.6 trillion in 2022. The majority of ETF assets are concentrated in North America, accounting for around $4.5 trillion of the global total. In the U.S., the level of equity ETFs is approximately five times higher than in the European or Asia-Pacific markets.
